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Identify, if any, the relationships between housing starts and mortgage rates.

Question:

Identify, if any, the relationships between housing starts and mortgage rates.

Mortgage rate:

This term is generally used to depict the interest rate charged on the loans or mortgages which is usually determined by the lenders and remains constant for the tenure of the loan.

Answer and Explanation:

The housing industry is one of the significant businesses in the US economy. Think about this, the US housing bubble breaks down where the Lehman brother (largest bank of the US) prompted the far-reaching worldwide financial crisis. Everything begins with a home loan. Most of the populaces take credits from banks to purchase homes. On the off chance that the home loan rates are low, there will be an expanded interest for home advances, and in this manner, there will be additional lodging housing infrastructure projects.

Be that as it may, when lending goes unregulated (as if there should be an occurrence of the money related emergency of 2008), banks and mutual funds began managing momentary assets to contract long-run resources. Hence, unpredictability in financial instruments (like CDS), expanded the risk for banks.


Learn more about this topic:

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Buying a House: Mortgage Types & Loan Length

from Finance 102: Personal Finance

Chapter 7 / Lesson 4
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